Average London house 'to cost £500,000'

By Rachel Cooper

Economic think tank, the Centre for Economics and Business Research, expects that a home in London will cost an average of £383,000 this year. But, it expects that to rise to £500,000 by the end of this decade. 

Although CEBR expects house price growth in London to be slower this year than in 2012, by the end of the decade, it predicts that house prices in the capital will be over 30pc higher than in 2013. 

Fuelling the rise is London's comparatively bright economic prospects, with the capital enjoying strong emerging market links and a relatively low reliance on the public sector. 

CEBR added that high rates of immigration into the capital bring a range of skills, languages and international commercial links which are forecast to spur London's economic and house price growth. 

However, CEBR's research shows that a 'North-South divide' remains. In the South East and East of England, the think tank predicts that house prices will rise by 24.8pc and 25.7pc respectively between 2013 and 2018. 

By contrast, house prices in Northern Ireland and the North East are forecast to grow by only 6pc and 2.3pc over the same period. 

Daniel Solomon, CEBR economist and main author of the report, said: "Before the decade is out, we predict the price of the average home in London will reach £500,000." 

"House price rises will be driven by London’s comparatively rosy economic growth prospects, buoyed by IT, business and professional services," he added. 

"Nevertheless, house price growth in London will remain notably slower than in the boom years before the financial crisis." 

While the forecast of accelerating prices in the capital could bring cheer to homeowners in London, it could spell further trouble for first-time buyers already struggling to get on the ladder in the capital. 

Figures show that twice as many Londoners between 25 and 34 rent rather than own a home. 

The Government has, however, taken steps to try to help first-time buyers get on the ladder, through schemes such as Frist Buy and New Buy. 

Under these schemes, 90-95pc mortgages are available on new homes built by participating developers. Telegraph